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Monday Nov 25, 2024
Monday, 1 July 2013 00:07 - - {{hitsCtrl.values.hits}}
Theory of value innovation
Understanding the fact that we live in a world of perception, Indian Institute of Management, Ahmadabad Professor of Marketing Abraham Koshy opined that this fact is a critical premise that is fundamental to marketing.
“Value is a perception to a customer, and it is up to the marketer to deliver an experience that will turn this perception into a reality. We need to go deep into the notion of value and find opportunities to help deliver this experience,” said Koshy.
Although importance is also perceptional to a consumer, he stressed that a ‘promise’ made to a consumer should be relevant and attractive.
Taking the example of the popular deodorant brand ‘Axe’ which promises to deliver the ‘Axe effect’, Koshy pointed out that though the effect may not be true, the brand has been successful in making consumers believe it to be real, resulting the product to be an immense success in the market.
“If you make a promise, you need to make sure that it is executed. The power of a promise cannot be underestimated since it can make a customer to test your product, which is the first level of acquisition. If he feels that the promise is delivered, he will remain with the brand. If he doesn’t, he will move to a product that he perceives to delivers its promise,” asserted Koshy.
To highlight the consequences of an overdone promise, Koshy presented the case of the nano car introduced by Tata India. Despite being a truly innovative product that was offered at a lower price without compromising its quality, Tata Nano was unsuccessful in capturing its targeted market share, even though it had an exceptional prelaunch exposure.
Koshy linked the low performance of this product to the fact that the price of the car was the only focus throughout the media campaign which led consumers to feel low if they were seen with the product.
“Unintentionally, the prestige element of the product was taken away by the marketers. While it’s true that consumers prefer any product products for a lower price, they failed to understand that the fact that consumers are not willing to compromise on value,” observed Koshy.
According to Koshy, delivering a promise always comes with a cost. This being the acquisition cost, he stated that a company should try their level best to reduce the cost incurred by the customer when trying to get in touch with a brand. While costs could be in terms of time and convenience, and not only money, Koshy stressed that by employing well thought out systems, the acquisition cost should be kept at a minimum level.
“To acquire a customer you don’t need great innovativeness, but good processes. Although many may look at these processes as an addition to overheads, in the long run, it will benefit the company,” said Koshy.
Noting that a company doesn’t have a brand if it doesn’t have a robust strategy, he stated that a promise should have the characteristics of increasing the perception of, the brand, the relationship between the consumer and the brand, and the customer experience. In addition to the mentioned, a promise should have a significant symbolic value as well.
Focusing on innovation, Koshy said that the best way to get about this is to look at the organisation from a conventional level.
“Innovation need not be like creating a light bulb. In marketing it can be done by imitating and burrowing ideas from other industries. Pure innovation happens only in laboratories, and it’s time we get that straight,” asserted Koshy.
Back to the value discourse
Postgraduate Institute of Management Director Professor Uditha Liyanage ex pressed that based on his experience; there are two key success features that are significant. The first is that when confronted with a problem, go back to the basics, and the second is to be brilliant with the basics. Stating that there are no substitutes for this, he said: “If you can say it in your own words and still be faithful to the original idea, you have mastered the basics.”
Liyanage highlighted that in marketing, there are just two equations that should be looked at. The customer equation, where it is value after deducting the price, it is also about customer perception. The second is the company equation where it is about price after removing the cost component. Having mentioned the two, Liyanage stressed that one should not be misled by the simplicity of the equations.
“A customer buys value and not products. Also, it is imperative to understand that a customer never falls in love with a product, but with its value alone,” he said.
With ‘value’ and ‘values’ being common words used by marketers, Liyanage stated that most of the professionals fail to differentiate between the two. He explained that when talking about ‘value’ versus ‘values’ it is about the desired and the desirable.
Presenting the types of values as functional, emotional and symbolic, he said: “If you want to understand the value, you need to get the classification right. Needless to say there is a cost when creating a value, and for this you need to have an integrated system since value cannot be created in isolation.”
With regard to delivering value for a price, Liyanage professed that a value for a product should be created with Promotion and Place, for a Price, which is the four Ps of marketing. Six Ps come into place when value proposition is taken into account, where the additional P’s are for Person and Position. “This falls under strategic marketing, which is also the holy grail of marketing where we talk about the STP (segmenting, targeting, and positioning) process.” he professed.
To have winning value proposition to a winning value margin, Liyanage stated that the process of the mind capturing value should be first understood.
According to him, when a mind captures a product, the question asked is ‘what is it about?’ where this deals with the category the object. Having answered the first it asks, ‘what is it?’ where it wants to know how different the product is from others that are in its category. He explained that by answering these questions, a marketer should create a point of difference.
“There are two important things that you must do, and that is to manage the customer equation, and manage the company equation to enjoy superior markets. If you can do that you will not just reach good markets, but great markets,” expressed Liyanage.
Thriving towards value based entrepreneurship
Going back to the history of our civilisation, Sasin Institute for Global Affairs Chulalongkorn University, Thailand Director Suvit Maesincee said that from 1000-1700, the world was characterised by static societies, local centrality and rural based communities.
During that time, the interaction among people was no more than a distance of 50 miles and dramatic changes occurred in the 18th century where static to growth, local to international, rural to urban development took place.
Maesincee attributed these changes to the technological advancements which brought about the first industrial revolution, in particular, the invention of stream engine and second industrial revolution with the invention of electricity and the telephone.
Stating that the pace of change accelerated from months to days, he said that the second dramatic change occurred when the world was moving towards the 21st century, where growth to dynamic, international to transnational, and urban to virtual developments were witnessed.
“The development of the 21st century was mainly due to the emergence of ICT.
The increase in connectivity, interactivity, mobility and virtuality, accelerated the pace of change from days to seconds,” said Maesincee.
He emphasised that the identity, security and prosperity of an individual nation, organisation or a person in this interconnected world are just few of the challenge and issues faced by the world today.
With the question of how can we thrive economically in such an interconnected world? Maesincee pointed out that globalisation changes the state of nature.
“The increasing connectivity, interactivity, mobility and virtuality have gradually transformed the world from solid phase modernity towards liquid phase modernity, and the latter is characterised by open multiplicity, interconnectivity and strategic interdependence, resulting in higher degree of uncertainty, complexity, rapid pace of change, greater scale, and scope of change,” he said.
Maesincee went on to say that from a management perspective, the problems of management in the solid phase modernity are in complete contrast to those of liquid phase modernity, and this is where a a new business environment is created.
“In the past, we treated the economy, society, and environment as separate landscapes. Now, we realise that they are completely interconnected. No matter which point of view we subscribe to, our action in one landscape will inevitably affect other landscapes. The convergence of human and technology leads to human interaction on various platforms, working through many operating systems, and using several communication protocols. So, we are truly not living in the social system but the socio-technical system,” he asserted.
According to Maesincee, to thrive in the new age of global capitalism, we need to reorient the management paradigm, redefine business objective functions, create a new business model, craft new business conduct, re-scope business value creation, develop new leadership skill-set, and set up new forms of organisations.
Value innovation from a South Asian perspective
Questioning on what does it take to create innovative ideas that actually work, nXtlyf Future Consulting Founder Chairman Bhupendra Sharma stated that one should not fall for the story that has been around for years which says that innovative ideas come from anywhere. “While the story is still true, an innovative agenda cannot just come from anywhere. It needs to be driven with leadership, that too with ability and confidence,” he stated.
Stressing that its agenda should be precise, Sharma opined that the first part of innovation is to penetrate mindsets. “This is very relevant for the South Asia region since mindsets are invisible barriers,” asserted Sharma while stating mindsets prevails in the levels of organisation, industry, culture, and country.
While the breakthrough in these four mindsets is imperative in marketing, Sharma observed that the best innovations are not from this part of the world. “We still have to drop this view. But it’s unfortunate that this is getting pronounced,” he said.
Sharma stressed that when one is talking about innovation and out of the box thinking, it is essential to confront the levels of mindsets. “Your innovation agenda setting should be along the lines of strategy, resource, idea, and structure for which you have to get back with aspiration, challenge, and impact,” stated Sharma.
Questioning where and how should one search for ideas, he said marketers need to create insights, but should not confuse this with data. “Companies have their own blind spots and they love it. So make sure that you don’t get excited about awareness. So the start point to seek unique insights is usually from the periphery of the current collective know-how of the organisation or industry-towards the core,” he said and added that insights are never about the consumer himself but his experience.
So what blocks insights? According to Sharma, it is narcissism. He stressed that both marketers as well as organisations have it, and they choose to look ahead through the rear mirror and self-project.
Taking digitisation as an example, Sharma said: “Businesses broadly misjudge what consumers want from them online. In particular, marketers often believe that consumers interact with them on social media to join a community and feel connected to a brand. But consumers have little interest in having a relationship that is beyond a transaction. Their top reasons for connecting online are merely to get information, discounts, and to buy things. This is not clearly understood.”
Moreover, pointing out that big ideas don’t get killed but gets diluted, he emphasised that it is the mindset that has the greatest influence on an individual’s approach to any situation. Only through aligning the mindset to the realities of the situation, most situation specific answers emerge. “Effective solutions often lie beyond the boundaries of convention, and it helps to preserve against the odds if one lifts an endeavor to the level of a cause,” stated Sharma.
Developing the organisational environment and people for value innovation
Commending marketers for having the ability to influence a company, 3M New Ventures Asia Pacific Managing Director Michelle Bellanca expressed that she truly believes that marketers are catalysts. “The marketing function has the ability to bring about change and one of the common denominators is that in the dynamic environment that we live in, marketers have the ability to break new ground,” said Bellanca.
Noting that the key strength of any company is its people as they are the ones who actually start the process of innovation, she said innovation need not just be in products and services, but in value elements as well.
“We are talking about what provides value to the customer that is unique, and this can be in terms of different business models. So we really need to broad the definition of innovation,” Bellanca stated.
Frowning on the fact that companies do not story tell enough on what takes place during an innovation, she noted that many would agree that the experience of value innovation is generally not easy.
“There is no straightforward path that is consistent and without challenge. It is like an adventure that you would read in a novel. It’s a story that has disappointments, failure, challenges, and obstacles. It has a hero or a heroine who doesn’t give up. It is a journey that explores courage, and discovers that, success and failure is just around the corner,” she expressed.
Stressing that to be successful in innovation, one cannot be afraid of failing and shouldn’t expect things to go perfect, Bellanca said that if one is going to breakthrough technology creation, it has a very different type of process where the need to architect and do things different is necessary, along with the awareness of how the business is organised.
“When you look at your organisational structure you need to see how you can share information. You need to ensure that information is spread in a cross functional manner and must understand if you are collaborating or competing amongst divisions. It is absolutely necessary for you to be extremely honest with yourself so measures can be taken to have a boundary-less structure,” stated Bellanca.
She elaborated that one should have the ability to make uncommon connections as this not only advances the opportunity for value addition, it decreases the company’s risk of failure simply because if action fails, there are two or three others that may succeed.
Pointing out that localisation is the next important piece, Bellanca stressed that it is impossible to serve locally a customer base being miles away from it.
“At 3M, in 2006, 20% of our products came from overseas, and marketing was the one that was getting pinned with this challenge. They told us over and over that if we want our products to be global, we have to be global. Whether your company is large or small, you need to keep up with this. The ones who move a small percent of their operations over to a market where they want to penetrate, even if it is just two people, they will be reaching success. So this whole notion about the proximity to the customer is a simple one but it is over looked many times,” explained Bellanca. To be successful in innovation, she stressed that one has to be open minded, as this is the key that drives value innovation in an organisation. “It is fine to have opinions, but you need to be open minded,” asserted Bellanca.
Process engineering for value innovation in organisations
Presenting the journey of hSenid since its establishment, hSenid Group of Companies Founder and CEO Dinesh Saparamadu said that while an organisational culture is what is in a company’s DNA, the best part of this is to have the right organisational culture. According to him, doing so, a company can bring in process innovation and process engineering to its everyday agenda.
“In the software industry, people usually talk about stealing IT and software. Even if you do steal an idea, you can never build an organisation around that. Organisation culture is unique for that organisation only,” said Saparamadu.
He elaborated that if the organisational culture is not managed well, it will come to a point where the culture will manage you. “If you do not have the right organisational culture, you will be a bowl of spaghetti, and it’s as simple as that,” he stated.
While for a lot of organisations, culture is mostly internal processes, Saparamadu stressed the need of conducting a culture diagnostic. “These are where you work with focused groups and bring to the table what your current culture is all about. Once you do this, you have to know where you want to move and then look at the desired culture,” he noted.
Saparamadu went on to say that by looking at the existing culture and the desired one, an execution process will have to be developed to understand how the company can drive towards its target.
“It’s all about sustainability of innovation and not about doing it once. For this you need to know if your teams are competitive. The biggest issue we have in Sri Lanka is that none our teams very much work together, and they do not know how out of the box thinking can be recognised,” asserted Saparamadu.
Speaking on measures taken by hSenid, he said a comprehensive employee handbook has been developed where it presents details about the organisation and its culture elements.
“When we recruit, we start with this. We have orientations to regular training where we look at how the new comers get involved in innovation through our culture. We promote and reward them the same way,” he shared.
For sustainable value innovation, he opined that there should be an encouraging organisation culture to create process engineering.
“What your CEO down talk’s day in and day out is what employees will be saying all the time. So innovating processes are only cultivated through culture,” Saparamadu said.
Value innovation in media strategy and reaching the consumer
With value innovation being a status that has changed over the years, KRDS Asia Business Head Preetham Venkky observed that the core objective is to build awareness and by doing so, a smaller proportion of consumers will consider the brand and will eventually go on to purchase the product itself. “Some things have changed lately. There is this whole new feedback system through social media which is that once people have consumed your product or service, they will form an opinion and talk about it with others. This never existed on a large scale before, but now it has the ability to take the opinion of a single person to a million consumers who are spread across the world,” noted Venkky.
He opined that with the new digital media, people are now experiencing brands and services before physically involving with them and that most decisions are taken at zero moments of truth, which is that people are making decisions even before using or buying a product.
“All campaigns made in social media need to be created in way where people feel that they are part of the group. You should make sure that they are able to express,” said Venkky while pointing out that social media resides on four pillars.
The first is that consumers are generating content, sharing is made easy, it allows consumers to express their views on the content created by the brand, and that last is that it allows to collaborate users and find those who have a say in the positioning of the brand.
“When we talk about new media, there is now from apps to concept stories. You need to know and who to reach out to. So new media allows you to target very successfully, and personalise the exact type of services a consumer might require. This revolves around social, local, and mobile, where all of this allows customisation,” stated Venkky.
He went on to say that the next thing is about allowing users to have conversations about the brand and this has to be enabled using technology. McDonald’s took this up when rumors were spread about their products, creating negative perception about the brand. They had allowed their consumers to put forward their questions to be answered and this initiative of allowing consumer to openly talk about the brand helped Mc Donald’s build confidence amongst their consumers.
Furthermore he said that when talking about media progression, storytelling is extremely important in the entire conversation process. Venkky noted that with traditional media avenues, storytelling is about getting a message out in 30 seconds or so. However, with new media, a brand can go beyond this and even get others to share the message.
Venkky shared as an example the ‘Dumb ways to die’ campaign, a public service announcement by the metro trains in Australia to promote rail safety. The campaign, which was conceptualised to engage audience, who did not want to hear any kind of safety message went viral through sharing and social media. It went on to generate at least AUS$ 50 million worth of global media value in addition to more than 700 media stories for a fraction of the cost of one television advertisement. The campaign was also note to be successful since it contributed to about 30% reductions in ‘near miss’ accidents.
Pix by Lasantha Kumara
